What is the most efficient way to collect rent as a landlord?
You want a process in place that encourages tenants to pay rent both easily and on time. That way you have a steady cash flow and a smooth relationship with your renters.
The good news is that there are several ways to make this happen. Read on to find out the best ways your tenants can pay their rent.
Screen Tenants for Solid Financial History
Always back up your tenant’s financial claims to be sure they’re qualified to make timely rent payments. Verify their employment, income, credit score, and references from previous landlords.
- Do they have a good history of paying rent on time?
- Do they earn more than two to three times the expected amount for rent each month?
- Have they been previously evicted or did they frequently forget to make payments?
- Do they have a significant amount of outstanding debt?
These are all important indicators of a prospective tenant’s reliability.
The best offense is a good defense. Ensure you outline in the lease the amount the tenant owes, how to pay it (including bank account numbers), when it’s due, how long they have to pay it before action is taken and what that action will entail (late fees, reports to credit agencies, eviction notices, etc.).
First things first: automation. This is today’s standard. Eliminating the renter’s trip to the bank or your office takes away the constraints of business hours. This increases the likelihood that you’ll get your rent check on or before the actual due date. It removes extra stress and frustration for your renter, which is always a plus and does away with any delays from checks in the mail.
If you have multiple properties, automation makes it easy to track payments. And – most importantly – it leaves a virtual paper trail backing up that data.
An easy out for automation? You can hire a property manager to rely on their billing and data processes, including their detailed documentation of tenant interactions.
Having an on-demand property manager to handle your financial affairs and tenant relationships means you don’t have to clear time from your schedule to coordinate transactions, manage accounts, or chase down late payments. Their legal expertise also comes in handy for reinforcing payment schedules.
Explore Online Options
To ensure that the process of paying rent requires as little time and effort as possible for everyone involved, offer an online auto-pay system. There are three main ways to automate rent payments:
- Set up a rent collection software
- Hire a property manager
- Charge rent as a bill through the tenant’s bank
Your tenant should have the option to sign for an Automated Clearing House (ACH) payment. This gives a party permission to draw directly from the renter’s bank account monthly. This is made possible by rent collection software like Cozy or Avail, or you can again outsource your landlord duties to a property manager.
Alternatively, the tenant can set up reminders to pay the rent through their own bank every month, like any other bill. This helps to avoid any bounced checks from automatic withdrawals.
Offer Alternatives to Electronic Transfer
You should also make sure your tenant has access to the internet. For tenants without secure access to a computer, PayPal and Venmo are user-friendly mobile banking apps accessible via smartphone.
PayPal can take a few days to conduct transfers while Venmo transactions are instant. Since these options require the tenant to set up an account, you’ll have to communicate with your tenant about using these services.
Consider a physical drop-box location or face-to-face encounter to collect rent if mobile apps aren’t a feasible solution. An on-site property manager can act as your stand-in for these encounters, especially if you are a remote homeowner.
A professional property management company can perform tenant screening and interviews on your behalf and adhere to strict rent collection policies. This expedites eviction notices for any late payments and ensures quality tenants who are most likely to pay rent on time in full.
A property manager will handle all of the legalities involved in homeownership, keeping your rent collection policies fair and timely.